Deceleration in growth arrested: FM

He was speaking at the ninth meeting of the Financial Stability and Development Council (FSDC) here.

P. Chidambaram. File Photo

Union Finance Minister P. Chidambaram, on Tuesday, said that the deceleration in economic growth had been arrested in the second quarter of 2013-14. Inflationary pressures and structural bottlenecks were, however, some of the factors that continued to weigh down the growth process, Mr. Chidambaram added. He was speaking at the ninth meeting of the Financial Stability and Development Council (FSDC) here.

Stressing the need for the government and the financial sector regulators to ensure robust growth and manage vulnerabilities, the Finance Minister said that inter-regulatory issues should be resolved in a time-bound manner by the FSDC Sub-Committee and priority should be accorded to steps such as common demat account for financial assets which would add considerable benefits to the consumers.

Reserve Bank of India Governor Raghuram Rajan, Finance Secretary Sumit Bose, Economic Affairs Secretary Arvind Mayaram and Securities and Exchange Board of India (SEBI) Chairman U. K. Sinha were also present at the FSDC meeting chaired by Mr. Chidambaram.

The FSDC made an assessment of the issues relating to financial stability, including preparedness of the Indian financial system for the impact of U.S. tapering, liquidity crunch and re-pricing of risk, according to an official statement issued here. It reviewed the progress on pursuing the implementation of recommendations of Financial Sector Legislative Reforms Commission (FSLRC); assessed the external sector vulnerabilities; deliberated on asset quality, capital adequacy and management and governance-related issues of banks; as also issuance of Basel-III compliant capital instruments by banks. The Reserve Bank apprised the Council of the developments under the aegis of the FSDC Sub-Committee since the last meeting of the FSDC held in October, 2013.

Asset quality

The FSDC also noted the deterioration in the asset quality of banks and its impact on capital adequacy ratios, the release said.

It reviewed the measures taken by the government and the RBI to revitalise the distressed assets and assessed the additional capital requirements of banks under the Basel-III norms.

“The Council apprised of certain management and governance-related issues of banks and discussed further remedial measures,” the release said.